Rent to Own Investing

When it comes to rent to own investing - when you are buying on a lease option - I tell my students to follow three basic steps in writing a proposal or offer to the seller:

1. Keep it simple

2. Do your homework

3. Determine your offer

Keep it simple - Sometimes we get too formal. We want to make sure we have the proper letterhead and business cards and look official up front. We feel this gives us the legitimacy a seller expects. However, counterintuitively, there are times when too much polish may in fact be detrimental to us because the seller finds it impersonal. Save the formal documents for after the deal is negotiated, when it needs to be drawn up in detail. That’s how you keep it simple in rent to own investing.

Do your homework - you can’t put together a proposal without first doing some research when buying on a lease option. You can’t base your offer purely on what you think the home is worth; you must incorporate the comparables as well. Comparables are key in rent to own investing, if you don’t get the price right you won’t be able to complete the sale on the back end and get paid.

Determine your offer - When buying on a lease option I usually include terms that will limit my risk. One approach is to include a clause that says my lease option can be terminated within 60 days with written notice to the owner. This provides an agreeable exit to problematic transactions. Another method that I use even more frequently is to make the start of the lease option contract subject to finding a tenant-buyer. This significantly reduces your overall risk and avoids having to begin funding monthly payments before you have your own funding source in place.

Remember rent to own investing doesn’t have to be that complicated - keep it simple, do your homework and make your offer.